Stiff competition hits Barclays, ICB

Mr Maina
Stiff competition and poor expansion plans have hit hard on two banks, Barclays and International Commercial Bank (ICB), which have announced to close some of their outlets.

That goes against the recent trend whereby banks were expanding very fast trying to capitalise on the rural areas which experience less competition compared to urban areas.

The first to announce the reduction of branches was ICB Tanzania, a Malaysian holding, which closed its two branches in Kariakoo and Haidery Plaza in the city centre to cut their network to three from five outlets.

ICB was followed by Barclays Bank that announced the closure of 10 branches countrywide and retrenched 100 workers, some from head office, terming the move as restructuring.

Barclays Bank Tanzania Managing Director Kihara Maina said the decision to close and merge the branches would enable the bank to invest more effective in opportunities as they present themselves.

“This is part of the organisation’s strategy to realign its geographical presence in the country,” Mr Maina said in a press release. “It is not a decision we are making lightly” he said, “but we must make sure we are positioned appropriately to deliver against expectations.”

The move will reduce Barclays’ network to 22 branches from the previous 32 and affect an estimated 100 employees who will be retrenched, some at the bank’s head office. 

The Serengeti Advisors’ banking survey of 2011 showed that Barclays Bank is the fourth biggest bank in the country with 668 employees or six per cent of the total 11,208 workers employed by banks.

BoT’s Director of Banking Supervision Agapiti Kobelo told the ‘Daily News’ over the weekend that the bank’s balance sheet was sound, healthy and there was nothing to worry about. 

Prof Warsame
“It is merely restructuring,” he explained. He said the decision to close branches was basically on the restructuring side after a cost benefit analysis, which  showed that the bank’s rapid expansion 12 years ago was not paying.

“There is stiff competition in the cities, but not in the rural areas, as banks’ penetration to the bankable population is still low, at only about 20 per cent,” Mr Kobelo said The Dhow Financial Managing Director, Prof Mohamed Warsame agreed with Mr Kobelo but said the bank had been struggling for the last 10 years due to rapid expansion.

Mr Warsame, a professor in financial matters, said there was also the fact that Barclays Bank wanted to maximise their ABSA Group and National Bank of Commerce (NBC) alliance to cut down operating costs.

 “They might have their own strategies. But I think they do not want to operate to compete with NBC,” Prof Warsame said.

It was only last financial year when Barclays Bank Tanzania unit returned to profit after a decade of losses by posting a net profit of 3.0bn/-  after a loss of 4.8bn/- in 2010. The net interest income, the money banks earn from interest charges on loans, fell 0.4 per cent to 28.2bn/- in the said year.

The branch closures could also affect the bank’s 52 ATMs strategically located countrywide and over 110,000 customers especially where it will remain without a branch like in Pemba.
Source: The Daily News,http://www.dailynews.co.tz,reported by Abduel Elinaza

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